How Homebuyers Can Protect Themselves Against Real Estate Scams

SOURCE: Realtor.com

Real estate fraud has become one of the fastest-growing types of scams in recent years, targeting homebuyers at every stage of the process.

The risks range from simple wire fraud to more elaborate schemes that can result in devastating financial losses.

In one such scam, a West Virginia couple lost a staggering $255,000 in a sophisticated scheme where the scammers hijacked email communications between the buyers and their real estate agent, then convinced them to wire the down payment to a fraudulent account.

The couple never saw the money again—and the criminals went unpunished.

Unfortunately, this homebuyer’s story is not an isolated one.

If you are considering buying a new home in 2025, you’ll need to stay vigilant. Here are the red flags to watch out for that may signal a potential scam—and how to keep your money safe.

Beware of wire fraud

Wire fraud is among real estate’s most pervasive—and costly—scams. This ruse often happens during mortgage transactions, where fraudsters intercept emails containing wiring instructions, manipulate the details, and trick victims into transferring money to accounts they control.

The consequences can be financially devastating, as funds often disappear into fake accounts, leaving victims with no recourse to recover their funds.

“There is a lot of wire fraud, and it is frightening that someone with your bank account number and routing number can request a payment,” says Bruce Ailion, a real estate professional and attorney, of Re/Max Town & Country in Atlanta.

Red flag: Be wary if you receive an email from someone who appears to be your mortgage broker with revised wiring instructions, especially one that urges you to act quickly.

“Consumers should be suspicious when a change in wiring instructions is requested,” says Ailion.

Always confirm details with the office, using a trusted phone number.

Protect your earnest money

Earnest money—a good faith deposit that signals your intent to buy a home—is another area ripe for exploitation.

Scammers may misuse these funds as operating capital or funnel them directly into their own pockets rather than depositing them into a secure escrow account.

“Many homeowners lose money when providing earnest money to a party or someone who is not placing the funds into a designated trust account,” says Ailion. “Often, this occurs with a new home builder. They will use the deposit as operating capital.”

If there is an issue with the builder or they go out of business, you are an unsecured creditor and will receive pennies on the dollar rather than your full escrow back, if that.

Red flag: Being asked to pay earnest money directly to a seller or a questionable account rather than a verified escrow or trust account.

Always ensure your deposit is handled by a reputable third party, such as a title company or escrow agent, who will secure the funds properly.

Fake listings

Many online platforms have become rife with fraudulent real estate listings. Scammers copy legitimate listings from trusted sites and post them at suspiciously low prices to lure victims.

“Buyers and renters should be careful when looking at properties offered by private owners online,” warns Cara Ameer, a real estate agent with Coldwell Banker in Los Angeles. “Craigslist is a website that many scammers have used to copy/paste listings from popular real estate websites and falsely advertise them for sale or lease.”

Ameer suggests researching the property’s address across multiple real estate sites as a precaution.

“Real estate listings are typically syndicated across several hundred websites, and if the information differs from what you are seeing, that tells you all you need to know,” she says.

Red flag: “If the information seems incomplete, the price too good to be true, and photos might be altered or copied from a legitimate listing, those are all red flags,” says Ameer.

Be cautious when someone asks for a deposit before signing a legitimate contract.

“They may want to meet and collect a deposit to take the property off the market, whether it is listed for rent or sale,” adds Ameer. “That is a huge red flag, and you should never give money to anyone upfront.”

Title scam

Real estate fraudsters often target vacant properties, especially in states like Florida, where out-of-state sellers are common.

Jeff Lichtenstein, CEO of Echo Fine Properties in Palm Beach, FL, recounts a scam involving a property listing where the seller’s identity was hijacked. His buyer was eager to buy the property, but Lichtenstein put on the brakes.

“When talking with the ‘seller’ after the lot went under contract, something in the conversation didn’t seem right,” Lichtenstein explains. “We contacted our title company and started to do a more detailed search. We then looked up the real seller, and sure enough it was a scam.”

Lichtenstein advises buyers to always verify the seller’s identity before authorizing any transactions. Scammers may use fraudulent seller identities to divert funds or disappear entirely, leaving homebuyers with nothing.

Red flag: Be wary if the seller is unwilling or unable to provide proof of ownership or if communication feels off, such as missing contact information or vague responses.

Also, always be cautious if a seller presses for a quick closing without sufficient documentation.

Vet contractors for home repairs

Scammers can also target people who have already bought their home.

Fraudulent contractors often target homeowners looking for maintenance or repairs. These scammers demand large advance payments and then disappear or perform substandard work.

“Often, homeowners rely on a word-of-mouth recommendation and do not do a thorough background check,” says Ailion. “Further investigation should be undertaken if someone is listed with the Better Business Bureau or has good reviews.”

Red flag: Contractors who request substantial upfront payments before starting or completing the work.

To protect yourself, thoroughly vet contractors by checking their licensing, insurance, and references. Avoid paying in full until the work is finished and it meets your standards.

SOURCE: Realtor.com